PART 1 LESSON 2BUDGETING METHODOLOGIESAn annual business plan or master budget called a summary budget is the formal budgetapproved by the top management. Budget is classified based on capacity, coverage, period or conditions. The following flow chart will give an idea.The master budget gives a forecast profit & loss A/c and forecast B/S. The master budget is a complete presentation of the operating plans of the entire company for therelevant budget period. It is a basis for the successful financial planning and cost control.In the master budget costs are classified and summarized by types of expenses as well as by departments.Thus the master budgets throw very useful information to the mgt. the master budget often called summary budget represents a standard for the achievement of whichall the departments will work. In accounts closing the actual happenings are recordedconsolidated and summarized whereas in master budget the plans for the forthcomingyear are recorded. The master budget is backed by a number of functional budgets.The steps involved in the development of master budget are given bellow.
Preparation of functional budgets for the forthcoming period.
Up and down adjustments to bring about harmony among different budgets.
Preparative of summary budget.
Budgeted P& L A/c.
Budgeted Balance Sheet.
Authentication of master budget by the BOD.RukshiCABudgetsCapacityCoveragePeriod ConditionFixed FlexibleFunctional budgetsMaster budgetsShort term budgetLong term budgetsBasic budgetsCurrent budget3